Read This Before Considering The First Milling Company (TADAWUL:2283) For Its Upcoming ر.س1.41 Dividend

The First Milling Company (TADAWUL:2283) is about to trade ex-dividend in the next three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Accordingly, First Milling investors that purchase the stock on or after the 7th of April will not receive the dividend, which will be paid on the 23rd of April.

The company's upcoming dividend is ر.س1.41 a share, following on from the last 12 months, when the company distributed a total of ر.س2.74 per share to shareholders. Looking at the last 12 months of distributions, First Milling has a trailing yield of approximately 3.6% on its current stock price of ر.س75.40. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for First Milling

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see First Milling paying out a modest 38% of its earnings. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 38% of its free cash flow in the past year.

It's positive to see that First Milling's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit First Milling paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. First Milling's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 71% a year over the past five years.

Given that First Milling has only been paying a dividend for a year, there's not much of a past history to draw insight from.

Final Takeaway

Is First Milling worth buying for its dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. All things considered, we are not particularly enthused about First Milling from a dividend perspective.

On that note, you'll want to research what risks First Milling is facing. Case in point: We've spotted 2 warning signs for First Milling you should be aware of.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.